MINDING YOUR BUSINESS

Pet hotels pick up clients, even as travel industry sags during recession

June 22, 2009|By Ann Meyer, SPECIAL TO THE TRIBUNE

With the travel industry plummeting last year, entrepreneur Saq Nadeem couldn't have picked a worse time to open a luxury pet hotel.

Nadeem's 25,000-square-foot Paradise 4 Paws resort, complete with splashing pool, indoor grassy play area, flat-screen TVs, Webcam access and private rooms with attached patios opened near O'Hare International Airport in May 2008, just as the travel industry was descending rapidly due to the economy.

A year later, the firm has taken off and Nadeem has plans to open a second location near Midway Airport by the end of the year. He hopes to have facilities open in 10 markets within the next five years if he can find funding.

Nadeem sunk every penny of his savings into the business and raised funds from individual investors, including several professors at his alma mater, Northwestern University's Kellogg School of Management.

The company's success is a credit to Nadeem's skillful execution, investors said.

"It's a unique idea, but it's also the implementation with loving care," that has made Paradise 4 Paws successful, said Kellogg dean emeritus Donald Jacobs, who has invested in the business.

While a master's student at Kellogg, Nadeem, who has a dog and two cats, came up with the concept of a luxury pet hotel located near the airport and open 24 hours a day to accommodate business travelers.

He took a consulting job after graduation, but his travel schedule made him realize the strength of his business plan. If he had a 7 a.m. flight Monday, he would have to drop off his dog at the kennel on Saturday, because it wasn't open Sunday or early enough Monday. If he got back late Thursday, he couldn't get his dog out until Friday, only to have to return it Saturday for the next week.

By building a pet resort near the airport and allowing 24-hour drop-off and pickup, Nadeem figured he could save pet owners time, money and guilt.

At $47 a night, dogs get a private room, plenty of playtime and round-the-clock care. The facility also is open for doggy day care any time of day or night, for $25 to $32 per day. With many customers watching their budget, Nadeem has created promotions, such as discounts for longer reservations, additional pets or frequent users.

Still, few people balk at the price, he said.

Bob Vetere, president of the American Pet Products Association, isn't surprised. He knows of one Virginia pet hotel charging $75 a night.

"If you're in the right spot where it can be supported, a lot of pet hotels are springing up and doing well," he said. "Pet owners are making decisions for their pets based on human feelings and emotions."

People treat their pets like children. That's one reason the pet industry is proving to be resilient during the recession, Vetere said.

Pet spending in 2008 hit $43.2 billion, up from $41.2 billion the prior year. And the trade association is projecting a 5 percent increase in spending this year to $45.4 billion.

Pet services, including boarding and day care, is projected to climb 6 percent to $3.4 billion this year, adding credence to the premise that pet owners are more likely to cut back on spending for themselves before their pets, Vetere said.

Retail giant PetSmart Inc., based in Phoenix, also has noticed the trend. It now has 152 PetsHotel locations, which offer suites with TVs and personal care, said spokeswoman Jessica Douglas. The company opened 45 PetsHotels last year and plans to open 14 this year, including two in Illinois, she said.

"We see the services in our PetsHotels continuing to be strong during peak travel times and holiday weekends," she said.

Even with growing competition, Paradise 4 Paws seems well-positioned due to its emphasis on convenience, investors said. Located near O'Hare, it offers extended parking and will get pet owners to and from the airport at any hour after they drop off their pets.

"The idea of putting it adjacent to where people need to go when they travel is unique," said Julie Hennessy, clinical professor of marketing at Kellogg, who has invested in the business.

What's more, few boarding facilities offer the space that Paradise 4 Paws does, said veterinarian Rae Ann Van Pelt, co-owner of Family Pet Animal Hospital in Chicago, who boards her own dogs there when she travels so they get more exercise.

The artificial-turf play area, which was built with a drainage system to allow for regular cleaning, sold Van Pelt on the place. She also appreciates that the animals are kept in rooms, not cages.

"It's less stressful for them," she said.

Standard suites for dogs are 4 feet by 7 feet with an additional 4-by-4 patio, but larger drywalled rooms are popular with families boarding several dogs together, Nadeem said.

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'09 pet spending

Pet spending last year hit $43.2 billion, up from $41.2 billion in 2007. This year, the American Pet Products Association is projecting an increase to: